Series 63

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The Foundation - The Uniform Securities Act (USA) - Definitions Part 5

  • ISSUER - "Issuer" means a person that issues or proposes to issue a security..."

By this definition, if a business or other person has begun the process that will result in the sale of securities to the public, it is already considered to be an "issuer" according to the law.

  • NONISSUER TRANSACTION - "Nonissuer transaction" ... means a transaction or distribution not directly or indirectly for the benefit of the issuer."

If the company gets the money from a transaction, it is an issuer transaction. If the company does not get the money from a transaction - it's a secondary market trade - this represents a nonissuer transaction.

  • OFFER TO PURCHASE - "Offer to purchase" includes an attempt or offer to obtain, or solicitation of an offer to sell, a security or interest in a security for value."

Definitions such as this and the definition of "sale," later, are necessary because they tie in with what is being sold or purchased - securities - and who is involved: registered persons.

  • SECURITY - "Security" means a note; stock; treasury stock; security future; bond; debenture; evidence of indebtedness; certificate of interest or participation in a profit-sharing agreement; collateral trust certificate; preorganization certificate or subscription; transferable share; investment contract; voting trust certificate; certificate of deposit for a security; fractional undivided interest in oil, gas, or other mineral rights; put, call, straddle, option, or privilege on a security, certificate of deposit, or group or index of securities, including an interest therein or based on the value thereof; put, call, straddle, option, or privilege entered into on a national securities exchange relating to foreign currency; or, in general, an interest or instrument commonly known as a "security"; or a certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing.
    1. Includes both a certificated and an uncertificated security;
    2. Does not include an insurance or endowment policy or annuity contract under which an insurance company promises to pay a fixed [or variable] sum of money either in a lump sum or periodically for life or other specified period;
    3. Does not include an interest in a contributory or noncontributory pension or welfare plan subject to the Employee Retirement Income Security Act of 1974;
    4. Includes an investment in a common enterprise with the expectation of profits to be derived primarily from the efforts of a person other than the investor and a "common enterprise" means an enterprise in which the fortunes of the investor are interwoven with those of either the person offering the investment, a third party, or other investors; and
    5. Includes as an "investment contract," among other contracts, an interest in a limited partnership and a limited liability company and an investment in a viatical settlement or similar agreement.

This quote from the 2002 USA is substantially the same as the 1956 Act. Don't try to memorize it! More helpful in passing the Series 63 exam will be a much shorter list of which things are not securities. This will be discussed later, along with a more detailed specification of the three-part test of what is a "security."

  • PERSON - "Person" means an individual; corporation; business trust; estate; trust; partnership; limited liability company; association; joint venture; government; governmental subdivision, agency, or instrumentality; public corporation; or any other legal or commercial entity."

This is a broad definition, as you can see. An individual is technically called "a natural person." But when you read that a "person" must be registered, you can see how far that term extends.

The Uniform Securities Act (USA) - Definitions Part 6

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